2012 -- S 2769

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO COURTS AND CIVIL PROCEDURE - THE STATE FALSE CLAIM ACT

     Introduced By: Senators Ciccone, and Picard

     Date Introduced: March 08, 2012

     Referred To: Senate Judiciary

It is enacted by the General Assembly as follows:

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     SECTION 1. Sections 9-1.1-3, 9-1.1-4 and 9-1.1-5 of the General Laws in Chapter 9-1.1

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entitled "The State False Claim Act" are hereby amended to read as follows:

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     9-1.1-3. Liability for certain acts. -- (a) Any person who:

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      (1) Knowingly presents, or causes to be presented, to an officer or employee of the state

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or a member of the guard a false or fraudulent claim for payment or approval;

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      (2) Knowingly makes, uses, or causes to be made or used, a false record or statement to

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get a material to a false or fraudulent claim paid or approved by the state;

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      (3) Conspires to defraud the state by getting a false or fraudulent claim allowed or paid

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commit a violation of subdivision (1),(2), (3), (4), (5), (6) or (7);

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      (4) Has possession, custody, or control of property or money used, or to be used, by the

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state and, intending to defraud the state or willfully to conceal the property, knowingly delivers,

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or causes to be delivered, less property than all of that money or property; the amount for which

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the person receives a certificate or receipt;

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      (5) Is Authorized authorized to make or deliver a document certifying receipt of property

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used, or to be used, by the state and, intending to defraud the state, makes or delivers the receipt

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without completely knowing that the information on the receipt is true;

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      (6) Knowingly buys, or receives as a pledge of an obligation or debt, public property

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from an officer or employee of the state, or a member of the guard, who lawfully may not sell or

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pledge the property; or

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      (7) Knowingly makes, uses, or causes to be made or used, a false record or statement

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material to conceal, avoid or decrease an obligation to pay or transmit money or property to the

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state, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to

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pay or transmit money or property to the state; is liable to the state for a civil penalty of not less

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than five thousand dollars ($5,000) five thousand five hundred dollars ($5,500) and not more than

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ten thousand dollars ($10,000) eleven thousand dollars ($11,000), plus three (3) times the amount

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of damages which the state sustains because of the act of that person. A person violating this

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subsection (a) shall also be liable to the state for the costs of a civil action brought to recover any

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such penalty or damages.

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      (b) Knowing and knowingly defined. As used in this section, the terms "knowing" and

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"knowingly" mean that a person, with respect to information:

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      (b) Definitions. -- For purposes of this section:

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      (1) “Knowing” and “knowingly” means that a person with respect to information:

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      (1)(i) Has actual knowledge of the information;

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      (2)(ii) Acts in deliberate ignorance of the truth or falsity of the information; or

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      (3)(iii) Acts in reckless disregard of the truth or falsity of the information;, and no proof

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of specific intent to defraud is required.

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      (c) Claim defined. - As used in this section, "claim" includes any request or demand,

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whether under a contract or otherwise, for money or property which is made to a contractor,

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grantee, or other recipient if the state provides any portion of the money or property which is

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requested or demanded, or if the state will reimburse such contractor, grantee, or other recipient

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for any portion of the money or property which is requested or demanded.

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      (c) “Claim” means any request or demand, whether under a contract or otherwise, for

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money or property and whether or not the state has title to the money or property, that:

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     (i) Is presented to an officer, employee, or agent of the state; or

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     (ii) Is made to a contractor, grantee, or other recipient, if the money or property is to be

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spent or used on the state’s behalf or advance a state program or interest, and if the state:

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     (A) Provides or has provided any portion of the money or property requested or

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demanded; or

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     (B) Will reimburse such contractor, grantee, or other recipient for any portion of the

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money or property which is requested or demanded; and

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     (C) Does not include requests or demands for money or property that the state has paid to

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an individual as compensation for state employment or as an income subsidy with no restrictions

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on that individual’s use of the money or property;

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     (3) “Obligation” means an established duty, whether or not fixed, arising from an express

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or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or

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similar relationship, from statute or regulation, or from the retention of any overpayment; and

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     (4) “Material” means having a natural tendency to influence, or be capable of

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influencing, the payment or receipt of money or property.

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      (d)(c) Exclusion. - This section does not apply to claims, records, or statements made

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under the Rhode Island personal income tax law contained in Rhode Island general laws chapter

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44-30.

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     9-1.1-4. Civil actions for false claims. -- (a) Responsibilities of the attorney general. -

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The attorney general diligently shall investigate a violation under section 9-1.1-3 of this section.

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If under this section the attorney general finds that a person has violated or is violating section 9-

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1.1-3 the attorney general may bring a civil action under this section against the person.

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      (b) Actions by private persons.

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      (1) A person may bring a civil action for a violation of section 9-1.1-3 for the person and

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for the state. The action shall be brought in the name of the state. The action may be dismissed

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only if the court and the attorney general give written consent to the dismissal and their reasons

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for consenting.

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      (2) A copy of the complaint and written disclosure of substantially all material evidence

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and information the person possesses shall be served on the state upon the attorney general. The

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complaint shall be filed in camera, shall remain under seal for at least sixty (60) days, and shall

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not be served on the defendant until the court so orders. The state may elect to intervene and

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proceed with the action within sixty (60) days after it receives both the complaint and the material

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evidence and information.

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      (3) The state may, for good cause shown, move the court for extensions of the time

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during which the complaint remains under seal under paragraph (2). Any such motions may be

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supported by affidavits or other submissions in camera. The defendant shall not be required to

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respond to any complaint filed under this section until twenty (20) days after the complaint is

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unsealed and served upon the defendant.

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      (4) Before the expiration of the sixty (60) day period or any extensions obtained under

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paragraph (3), the state shall:

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      (A) Proceed with the action, in which case the action shall be conducted by the state; or

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      (B) Notify the court that it declines to take over the action, in which case the person

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bringing the action shall have the right to conduct the action.

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      (5) When a person brings an action under this subsection (b), no person other than the

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state may intervene or bring a related action based on the facts underlying the pending action.

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      (c) Rights of the parties to Qui Tam actions.

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      (1) If the state proceeds with the action, it shall have the primary responsibility for

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prosecuting the action, and shall not be bound by an act of the person bringing the action. Such

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person shall have the right to continue as a party to the action, subject to the limitations set forth

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in paragraph (2).

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      (2) (A) The state may dismiss the action notwithstanding the objections of the person

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initiating the action if the person has been notified by the state of the filing of the motion and the

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court has provided the person with an opportunity for a hearing on the motion.

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      (B) The state may settle the action with the defendant notwithstanding the objections of

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the person initiating the action if the court determines, after a hearing, that the proposed

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settlement is fair, adequate, and reasonable under all the circumstances. Upon a showing of good

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cause, such hearing may be held in camera.

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      (C) Upon a showing by the state that unrestricted participation during the course of the

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litigation by the person initiating the action would interfere with or unduly delay the state's

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prosecution of the case, or would be repetitious, irrelevant, or for purposes of harassment, the

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court may, in its discretion, impose limitations on the person's participation, such as:

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      (i) Limiting the number of witnesses the person may call:

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      (ii) Limiting the length of the testimony of such witnesses;

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      (iii) Limiting the person's cross-examination of witnesses; or

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      (iv) Otherwise limiting the participation by the person in the litigation.

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      (D) Upon a showing by the defendant that unrestricted participation during the course of

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the litigation by the person initiating the action would be for purposes of harassment or would

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cause the defendant undue burden or unnecessary expense, the court may limit the participation

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by the person in the litigation.

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      (3) If the state elects not to proceed with the action, the person who initiated the action

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shall have the right to conduct the action. If the state so requests, it shall be served with copies of

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all pleadings filed in the action and shall be supplied with copies of all deposition transcripts (at

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the state's expense). When a person proceeds with the action, the court, without limiting the status

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and rights of the person initiating the action, may nevertheless permit the State to intervene at a

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later date upon a showing of good cause.

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      (4) Whether or not the state proceeds with the action, upon a showing by the state that

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certain actions of discovery by the person initiating the action would interfere with the state's

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investigation or prosecution of a criminal or civil matter arising out of the same facts, the court

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may stay such discovery for a period of not more than sixty (60) days. Such a showing shall be

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conducted in camera. The court may extend the sixty (60) day period upon a further showing in

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camera that the state has pursued the criminal or civil investigation or proceedings with

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reasonable diligence and any proposed discovery in the civil action will interfere with the

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ongoing criminal or civil investigation or proceedings.

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      (5) Notwithstanding subsection (b), the state may elect to pursue its claim through any

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alternate remedy available to the state, including any administrative proceeding to determine a

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civil money penalty. If any such alternate remedy is pursued in another proceeding, the person

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initiating the action shall have the same rights in such proceeding as such person would have had

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if the action had continued under this section. Any finding of fact or conclusion of law made in

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such other proceeding that has become final shall be conclusive on all parties to an action under

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this section. For purposes of the preceding sentence, a finding or conclusion is final if it has been

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finally determined on appeal to the appropriate court, if all time for filing such an appeal with

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respect to the finding or conclusion has expired, or if the finding or conclusion is not subject to

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judicial review.

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      (d) Award to Qui Tam plaintiff.

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      (1) If the State proceeds with an action brought by a person under subsection 9-1.1-4(b),

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such person shall, subject to the second sentence of this paragraph, receive at least fifteen percent

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(15%) but not more than twenty-five percent (25%) of the proceeds of the action or settlement of

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the claim, depending upon the extent to which the person substantially contributed to the

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prosecution of the action. Where the action is one which the court finds to be based primarily on

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disclosures of specific information (other than information provided by the person bringing the

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action) relating to allegations or transactions in a criminal, civil, or administrative hearing, in a

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legislative, administrative, or Auditor General's report, hearing, audit, or investigation, or from

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the news media, the court may award such sums as it considers appropriate, but in no case more

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than ten percent (10%) of the proceeds, taking into account the significance of the information

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and the role of the person bringing the action in advancing the case to litigation. Any payment to

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a person under the first or second sentence of this paragraph (1) shall be made from the proceeds.

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Any such person shall also receive an amount for reasonable expenses which the court finds to

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have been necessarily incurred, plus reasonable attorneys' fees and costs. The state shall also

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receive an amount for reasonable expenses which the court finds to have been necessarily

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incurred by the attorney general, including reasonable attorneys' fees and costs, and the amount

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received shall be deposited in the false claims act fund created under this chapter. All such

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expenses, fees, and costs shall be awarded against the defendant.

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      (2) If the state does not proceed with an action under this section, the person bringing the

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action or settling the claim shall receive an amount which the court decides is reasonable for

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collecting the civil penalty and damages. The amount shall be not less than twenty-five percent

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(25%) and not more than thirty percent (30%) of the proceeds of the action or settlement and shall

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be paid out of such proceeds. Such person shall also receive an amount for reasonable expenses

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which the court finds to have been necessarily incurred, plus reasonable attorneys' fees and costs.

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All such expenses, fees, and costs shall be awarded against the defendant.

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      (3) Whether or not the state proceeds with the action, if the court finds that the action

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was brought by a person who planned and initiated the violation of section 9-1.1-3 upon which

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the action was brought, then the court may, to the extent the court considers appropriate, reduce

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the share of the proceeds of the action which the person would otherwise receive under paragraph

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(1) or (2) of this subsection (d), taking into account the role of that person in advancing the case

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to litigation and any relevant circumstances pertaining to the violation. If the person bringing the

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action is convicted of criminal conduct arising from his or her role in the violation of section 9-

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1.1-3, that person shall be dismissed from the civil action and shall not receive any share of the

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proceeds of the action. Such dismissal shall not prejudice the right of the state to continue the

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action.

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      (4) If the state does not proceed with the action and the person bringing the action

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conducts the action, the court may award to the defendant its reasonable attorneys' fees and

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expenses if the defendant prevails in the action and the court finds that the claim of the person

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bringing the action was clearly frivolous, clearly vexatious, or brought primarily for purposes of

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harassment.

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      (e) Certain actions barred.

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      (1) No court shall have jurisdiction over an action brought by a former or present

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member of the guard under subsection 9-1.1-4(b) (actions by private persons) against a member

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of the guard arising out of such person's service in the guard.

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      (2) No court shall have jurisdiction over an action brought pursuant to subsection 9-1.1-

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4(b) (actions by private persons) against the governor, lieutenant governor, the attorney general,

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members of the general assembly, a member of the judiciary, the treasurer, secretary of state, the

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auditor general, any director of a state agency, and any other individual appointed to office by the

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governor if the action is based on evidence or information known to the state when the action was

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brought.

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      (3) In no event may a person bring an action under subsection 9-1.1-4(b) which is based

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upon allegations or transactions which are the subject of a civil suit or an administrative civil

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money penalty proceeding in which the state is already a party.

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      (4) (A) No The court shall dismiss have jurisdiction over an action or claim under this

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section, unless opposed by the state, if substantially the same allegations as alleged in the action

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or claim where publicly disclosed. based upon the public disclosure of allegations or transactions

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     (i) in In a state criminal, civil, or administrative hearing, in which the state or it’s agent is

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a party.

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     (ii) in In a legislative, administrative, or auditor general's or other state of Rhode Island

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report, hearing, audit, or investigation, or

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     (iii) from From the news media, unless the action is brought by the attorney general or

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the person bringing the action is an original source of the information.

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      (B) For purposes of this paragraph exclusion, "original source" means an individual who

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either: (i) Prior to a public disclosure under 9-1.4-4 (e)(4)(A), has voluntarily disclosed to the

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state has direct and independent knowledge of the information on which the allegations or

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transactions in a claim are based; or (ii) Who has knowledge that is independent of and materially

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adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the

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information to the state before filing an action under this section which is based on the

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information.

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      (f) State not liable for certain expenses. - The state is not liable for expenses which a

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person incurs in bringing an action under this section.

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      (g) Any employee, contractor or agent or associated others who is discharged, demoted,

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suspended, threatened, harassed, or in any other manner discriminated against in the terms and

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conditions of employment by his or her employer because of lawful acts done by the employee,

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contractor or agent or associated others on behalf of the employee or others in furtherance of an

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action under this section, including investigation for, initiation of, testimony for, or assistance in

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an action filed or to be filed under this section or other efforts to stop one or more violations of

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this subsection, shall be entitled to all relief necessary to make the employee whole. Such relief

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shall include reinstatement with the seniority status such employee would have had but for the

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discrimination, two (2) times the amount of back pay, interest on the back pay, and compensation

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for any special damages sustained as a result of the discrimination, including litigation costs and

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reasonable attorneys' fees. An employee, contractor or agent or associated others may bring an

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action in the appropriate superior court for the relief provided in this subsection 9-1.1-4(g).

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     (h) Limitation on bringing Civil Action. – A civil action under this subsection may not be

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brought more than three (3) years after the date when the retaliation occurred.

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     9-1.1-5. False claims procedure. -- (a) A subpoena requiring the attendance of a witness

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at a trial or hearing conducted under section 9-1.1-4, may be served at any place in the state.

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      (b) A civil action under section 9-1.1-4 may not be brought:

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      (1) More than 6 years after the date on which the violation of section 9-1.1-3 is

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committed, or

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      (2) More than three (3) years after the date when facts material to the right of action are

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known or reasonably should have been known by the official of the state charged with

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responsibility to act in the circumstances, but in no event more than ten (10) years after the date

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on which the violation is committed, whichever occurs last.

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      (c) If the state elects to intervene and proceed with an action brought under subparagraph

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9-1.1-4(i) the state may file its own complaint or amend the complaint of a person who has

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brought an action under section 9-1.1-4 to clarify or add detail to the claims in which the state is

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intervening and to add any additional claims with respect to which the state contends it is entitled

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to relief. For statute of limitations purposes, any such state pleading shall relate back to the filing

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date of the complaint of the person who originally brought the action, to the extent that the claim

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of the state arises out of the conduct, transactions, or occurrences set forth, or attempted to be set

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forth, in the prior complaint of that person.

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      (c)(d) In any action brought under section 9-1.1-4, the state shall be required to prove all

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essential elements of the cause of action, including damages, by a preponderance of the evidence.

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      (d)(e) Notwithstanding any other provision of law, a final judgment rendered in favor of

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the state in any criminal proceeding charging fraud or false statements, whether upon a verdict

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after trial or upon a plea of guilty, or nolo contendere shall estop the defendant from denying the

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essential elements of the offense in any action which involves the same transaction as in the

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criminal proceeding and which is brought under subsections 9-1.1-4(a) or 9-1.1-4(b).

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     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO COURTS AND CIVIL PROCEDURE - THE STATE FALSE CLAIM ACT

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     This act would make amendments to the false claim act that is required by the federal

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government in order for the state to obtain federal funding.

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     This act would take effect upon passage.

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